Assessment of Ukraine’s external debt burden under geopolitical instability

Abstract

Several specific features and circumstances can characterize Ukraine’s policy of external public debt management, and the results are not always unambiguous. The study aims to assess the effect of external public debt on Ukraine’s economy from 2014 to 2022, a period that includes the Crimea annexation, the onset of the COVID-19 pandemic, and the beginning of the open Russian military aggression. To analyze the contemporary state of public debt and assess the degree of external debt burden’s impact on the country’s economy, a factor analysis technique known as the principal components method was used. Via the STATISTICA.12 software, it was substantiated that the debt situation worsens with the growth of debt burden and solvency indicators as their values approach the thresholds. The application of the Kaiser criterion allowed the selection of the most influential indicators (principal components) for assessing the external debt burden. The eigenvalue of the first component (inflation rate) is 4.48, and it explains 50% of the variance; the second component (production of export-oriented goods) has an eigenvalue of 2.43, explaining 27% of the variance; the third component (government spending on military purposes) has an eigenvalue of 1.24, and it explains 14% of the variance.